Front-Loaded or Back-Loaded Fiscal Adjustments: What Works in Emerging Market Economies?

By Benedict J. Clements, Sanjeev Gupta, Emanuele Baldacci, Carlos Mulas-Granados

August 1, 2004

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Benedict J. Clements, Sanjeev Gupta, Emanuele Baldacci, and Carlos Mulas-Granados. Front-Loaded or Back-Loaded Fiscal Adjustments: What Works in Emerging Market Economies?, (USA: International Monetary Fund, 2004) accessed September 19, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper investigates the political and economic determinants of successful fiscal adjustment in 25 emerging market economies from 1980 to 2001. The results show that large and back-loaded fiscal adjustments have the highest likelihood of success. Fiscal consolidations based on expenditure cuts increase the probability of approaching and achieving fiscal sustainability but are insufficient to maintain it unless accompanied by revenue reforms. Adjustment episodes launched in countries where governments enjoy a parliamentary majority and do not face imminent elections, are found to be more successful. Fiscal consolidations undertaken under IMF-supported programs also have a higher probability of success.

Subject: Fiscal consolidation, Fiscal policy, Fiscal stance, Fiscal sustainability, Public debt

Keywords: Big-bang adjustment variable, Emerging markets, Fiscal adjustment, Fiscal consolidation, Fiscal consolidations, Fiscal stance, Fiscal sustainability, IMF arrangement, IMF dummy, IMF support, IMF-standby arrangement, Political economy, Reports result, WP

Publication Details

Pages:

25
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2004/157
Stock No:

WPIEA1572004
ISBN:

9781451857528
ISSN:

1018-5941

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